Yahoo Finance SHF Holdings Inc (SHFS) (Q1 2024) Earnings Call Transcript Highlights: A Turnaround Story with ...
Total Revenue: $4.1 million in Q1 2024, slightly down from $4.2 million in the prior year period.
Loan Interest Income: Increased by over 250% to $1.6 million in Q1 2024 from $466,000 in Q1 2023.
Depository Fees: Decreased 28% to $1.62 million in Q1 2024 from $2.25 million in Q1 2023.
Operating Expense: Decreased by more than 35% to $3.7 million in Q1 2024 from $5.8 million in Q1 2023.
Net Income: Reported at nearly $2 million in Q1 2024, a significant improvement from a net loss of $1.4 million in the prior year period.
Adjusted EBITDA: $1 million in Q1 2024, up from $409,000 in the prior year period.
Cash and Cash Equivalents: $5.6 million as of March 31, 2024, compared to $4.9 million at the end of 2023.
Cash Flow from Operations: $1.4 million in Q1 2024, improved from $232,000 used in Q1 2023.
Net Working Capital: Improved to $318,000 in Q1 2024 from a deficit of $135,000 at the end of 2023.
Release Date: May 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
SHF Holdings Inc reported a significant increase in loan income, which rose 250% year-over-year to $1.6 million in Q1 2024.
The company successfully expanded its lending program, nearly tripling the value of its loan book compared to the previous year.
SHF Holdings Inc reduced total operating expenses by over 36%, improving operating efficiency and contributing to positive net operating margins.
The company is well-positioned in the cannabis finance industry, offering a unique suite of compliant financial services that are difficult for competitors to replicate.
SHF Holdings Inc is strategically expanding its product and service offerings, aiming to capture new customers and increase deposit accounts through its high-margin lending program.
Negative Points
Total revenue slightly decreased to $4.1 million in Q1 2024 from $4.2 million in the previous year, primarily due to lower investment income and deposit activity.
The termination of a master services and revenue sharing agreement with Central Bank in Arkansas led to a significant drop in client accounts and a 28% decrease in depository fees.
Despite the growth in some areas, the company experienced fewer accounts being opened and lower deposit balances compared to the prior year.
Issues with payment networks continue to make the industry predominantly cash-intensive, which poses ongoing operational challenges.
The cannabis industry remains under the Controlled Substance Act, and despite potential legislative changes, compliance and oversight requirements continue to be stringent and complex.
Q & A Highlights
Q: Can you provide an overview of SHF Holdings' performance in the first quarter of 2024? A: Sundie Seefried, CEO, highlighted that SHF Holdings focused on advancing newer lines of business, enhancing its position as a premier financial services provider for cannabis-related businesses. The company's lending program has been particularly successful, with loan income increasing 250% year-over-year to $1.6 million. Despite a decrease in depository fees due to a reduction in client accounts, the company has strategically shifted towards a more diversified income stream.
Q: How has the lending program evolved over the past year? A: CEO Sundie Seefried explained that the lending program, introduced in 2022, has seen significant growth. From being a nominal part of the business, loan interest income now represents over 40% of revenue. The value of the loan book nearly tripled year-over-year by the end of Q1 2024, demonstrating market acceptance and supporting the company's goal of diversifying income streams.
Q: What impact did the termination of the master services and revenue sharing agreement with Central Bank in Arkansas have on SHF Holdings? A: The termination led to a decrease in the total number of client accounts from 1,040 to 757 as of March 31, 2024. This reduction negatively impacted the quarterly depository fees, which decreased by 28% to $1.62 million compared to $2.25 million in the first quarter of 2023.
Q: What are the anticipated effects of the proposed rescheduling of cannabis from a Schedule I to a Schedule III substance? A: CEO Sundie Seefried believes that rescheduling cannabis will be a significant catalyst for the industry, leading to greater access to traditional financing channels. This change is expected to allow cannabis businesses to deliver stronger financial returns and potentially lead to greater lending opportunities for Safe Harbor.
Q: How did SHF Holdings' financial results for Q1 2024 compare to the previous year? A: CFO James Dennedy reported that total revenue was $4.1 million, slightly down from $4.2 million in the prior year. However, the substantial increase in loan interest income and a decrease in operating expenses led to a net income of nearly $2 million, compared to a net loss of $1.4 million in the prior year period.
Q: What are SHF Holdings' financial expectations for the full year of 2024? A: CFO James Dennedy expects to generate slightly better adjusted EBITDA on modestly higher revenue compared to 2023. The company anticipates continued growth and operational efficiency improvements throughout the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
